Yum Brands to keep up Russia expansion as consumers shun fine dining

Reuters Staff

3 Min Read

MOSCOW (Reuters) - U.S. fast-food giant Yum Brands Inc YUM.N said on Friday it planned to keep up the pace of expansion of its KFC chain in Russia, seeing an opportunity in a crisis that is leading consumers to seek cheaper treats over fine meals.

A Kentucky Fried Chicken (KFC) sign is pictured outside its restaurant in Paramus, New Jersey July 8, 2015. REUTERS/Eduardo Munoz

Russia is suffering its worst economic downturn since 1998 due to weak oil prices and Western sanctions over its role in the Ukraine conflict. The rouble has dropped, stoking inflation and squeezing consumer incomes and spending.

Oleg Pisklov, head of Yum Restaurants International Russia, said it opened 100 KFC restaurants in Russia and neighboring former Soviet countries last year and planned to add around the same number this year and in 2016, despite the higher cost of imported materials due to the weaker rouble.

KFC plans to grow in Russia, which accounts for the bulk of new openings in the region, by taking market share from restaurants with higher prices, after growth in consumer spending came to a halt, Pisklov told a press conference.

“Students, our key customers, have less money so fewer of them come to us, but on the other hand, people who used to visit mid-priced restaurants start coming to us more often as those restaurants become less affordable,” he said.

The unit’s sales will rise 45 percent in 2015 after 30-40 percent growth on average in previous years. Turnover has increased five-fold in the past five years since Yum bought out its local partner in 2010.

“We feel significantly better than the market ... Our prices rise much slower than inflation and this strategy allows us to win market share because when consumption declines and there is less money to spend on restaurants you can not be successful without a competitive price,” Pisklov said.

Yum currently has 430 KFC restaurants in the CIS region of former Soviet countries, mostly in Russia, some 70 percent of which are owned by franchisees. Globally it has 14,000 outlets.

Pisklov declined to answer questions about expansion of Yum Brands’ Pizza Hut brand in the region.